The goal of the Ministry of Finance is to reduce public spending share in GDP

The Minister of Finance Diana Dragutinović said that the most important goal of this Ministry is reduction of public spending share in gross domestic product (GDP).

During last couple of years, public spending share in GPD has increased for 3.6 percentage points, from 40.4 to 44 percents. This year will see similar thing, i.e. somewhere less is we don’t have budget rebalance. The key issue is to have relative decline in public spending share in the next year. For me the starting point is Memorandum on budget policy, which has been adopted.

The budget rebalance will most likely be adopted by the end September. Expenditures can be increased if collection is to be increased, but again, public spending should not exceed 43 percent of gross domestic product. That way we would join group of countries with medium-high public spending levels. Let me remind that there are countries where public spending is between 35 and 39 percent of GDP, then countries with 40-44 percent public spending share of GDP, among which is Serbia, and the third category, mainly composed out of underdeveloped countries, have public spending share higher than 44 percent. Of course, I would be very happy if I could lead Serbia into the first group.

The Minister of Finance Diana Dragutinović said that the most important goal of this Ministry is reduction of public spending share in gross domestic product (GDP).

During last couple of years, public spending share in GPD has increased for 3.6 percentage points, from 40.4 to 44 percents. This year will see similar thing, i.e. somewhere less is we don’t have budget rebalance. The key issue is to have relative decline in public spending share in the next year. For me the starting point is Memorandum on budget policy, which has been adopted.

The budget rebalance will most likely be adopted by the end September. Expenditures can be increased if collection is to be increased, but again, public spending should not exceed 43 percent of gross domestic product. That way we would join group of countries with medium-high public spending levels. Let me remind that there are countries where public spending is between 35 and 39 percent of GDP, then countries with 40-44 percent public spending share of GDP, among which is Serbia, and the third category mainly composed out of underdeveloped countries with public spending share higher than 44 percent. Of course, I would be very happy if I could lead Serbia into the first group.

One serious tax reform must be executed. There are areas where is clear that we are far from European standards. That is especially the case with the excises and oil derivates, but mostly when it comes to the excises on cigarettes which are lowest, not only in the region, but in the whole of Europe. Indeed, there is an agreement with the producers that they can not be changed before 2010, but after that they will see significant increase. Secondly, citizens’ income tax policy must be reformed, firstly by introducing synthetical taxation. Regarding expenditures, their share should decline against GDP, and additionally their structure must change. That means increased disbursements for infrastructure, education and other areas which would increase home economy’s competitiveness.

I have found public finances liquid, meaning that more funds are coming in than being spent. But the budget has been projected with the deficit of some two percent of GDP, and that is the main problem.